Tajikistan needs urgent reforms to revive its banking sector

Tajikistan needs urgent reforms to revive its banking and financial sectors, said Asian Development Bank (ADB).

Tajikistan’s economic growth is forecast to moderate in 2017, reflecting losses in the banking sector and weak remittances, ADB said in its report.

The Asian Development Outlook 2017 (ADO) forecasts growth in Tajikistan to come in at 4.8% in 2017, as high loan losses limit bank lending and weak remittances curb consumption, before picking up to 5.5% in 2018.

ADB believes that over the medium-term, the country should raise the capital adequacy ratio to enhance confidence in the banking system, establish credit insurance and guarantee schemes to facilitate export financing, introduce more convenient and up-to-date banking facilities, and require banks to disclose their ownership and financial results.

In addition, the authorities should develop an effective stress-testing framework, introduce long-term foreign exchange risk hedging, and take steps to establish inflation targeting that could support the national currency over the medium-to-long term, according to the report.

Inflation is forecast to accelerate to 8% in 2017 – reflecting higher liquidity as troubled banks are recapitalized, rising electricity tariffs and the cost of other public services, and continued currency depreciation – before easing back to 7% in 2018.

Tajikistan joined ADB in 1998. To date, ADB has approved over $1.5 billion in concession loans, grants, and technical assistance to the country. ADB’s country partnership strategy with Tajikistan focuses on improved infrastructure, investment climate reforms, and improved food security. (Trend/Business World Magazine)